Chances are, you’ve heard about ROI since your first day on the job (or your Marketing 101 class in college). But what is ROAS, and how much should you care about it for your brand?

What is ROAS?

ROAS (return on ad spend) measures revenue generated for every dollar spent on an advertising campaign. ROAS indicates the success of your specific campaign, not your overall ROI (return on investment). Put another way: If you advertise to a customer, will you convert a purchase? Can you capture that customer and return a sale?

How is it different from ROI?

ROAS looks only at a brand’s ad spend, making it narrower than ROI. Each company will have its own definitions and methodologies for calculating ROI. In some cases, ROAS and ROI could be the same thing.

Typically, ROI considers multiple costs and marketing levers (in addition to ad spend) as well as overall budgets for a category or business line.

True ROI is often difficult and expensive to measure — with long lead times — especially if your products have an intricate path to purchase (if you’re selling direct-to-consumer or via e-commerce channels, ROI measurement gets a little easier).

Why is ROAS important?

In e-commerce and lower-funnel campaigns, ROAS is a critical factor for measurement and campaign optimization. Instead of waiting months to understand how much revenue your advertising generated, ROAS is a near-real-time metric. ROAS gives ad buyers insight into what tactics are driving immediate sales, so brands can make informed optimizations throughout an entire campaign.

Newer measurements including ROAS are gaining importance for the home and building category, where products that previously targeted only trade audiences are becoming more relevant for consumers.

How can Wray Ward help you optimize your ROAS?

Just like a skilled financial advisor will maximize your investments by navigating changing market conditions, our Connections team has the experience and deep understanding needed to make strategic decisions that will grow your business and keep you on the path toward success. We use advanced algorithms that are anything but set-and-forget, optimizing against return metrics while also looking at other factors in context.

Our team taps into a mixture of artificial intelligence (AI) tools and human instinct to:

• Determine percentage of advertising budget to dedicate to ROAS goal
• Cap ROAS to avoid inflating the metric (e.g., selling to people who already planned to buy)
• Consider and recommend the most profitable cadence for your campaigns
• Look at total sales volume to ensure ROAS correlates positively with sales
• Successfully navigate digital advertising walled gardens
• Turn off ads to repeat customers, reserving ad spend for all new customers

Campaign design and measurement depend on the brand’s larger objectives. For instance, if you want to grab market share from a competitor, we may focus on competitive conquesting. This is a great example of when ROAS may slightly decline, yet the campaign would still be successful as long as it delivered on the brand objective(s).

On the other hand, to improve ROAS and close the sale, we would allocate 100% of your budget for an Amazon campaign into reaching people who are already searching for your brand on the site.